Learning or Leaning: Persistent and Transitory Spillovers from FDI

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Title: Learning or Leaning: Persistent and Transitory Spillovers from FDI
Authors: Davies, Ronald B.
Lamla, Michael J.
Schiffbauer, Marc
Permanent link: http://hdl.handle.net/10197/7529
Date: Feb-2016
Abstract: Using firm-level data for Jordan, we estimate the extent to which growth spillovers from foreign direct investment (FDI) to local firms stem from persistent learning externalities (i.e., they endure even after foreign investment leaves as knowledge has been transferred to local firms) or from transitory effects (e.g., demand increases which evaporate following disinvestment). We find that they have a significant transitory nature, with employment and capital growth declining when FDI falls, particularly in downstream industries supplied by locals. This suggests that if FDI-attracting policies are intended to promote sustainable growth, it may be more effective to attract and retain FDI via long-term structural policies, for instance, through low corporate tax rates rather than temporary tax holidays or through policies that strengthen the domestic absorptive capacity and linkages between foreign and local firms.
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Keywords: FDI;Spillovers
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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